Policies to unleash UK community energy finance

Policies to unleash UK community energy finance

Dr Matthew Hannon, University of Strathclyde
Dr Iain Cairns, University of Strathclyde
Dr Tim Braunholtz-Speight, Tyndall Centre for Climate Change Research, University of Manchester
Dr Jeff Hardy, Imperial College London
Prof Carly McLachan, Tyndall Centre for Climate Change Research, University of Manchester
Dr Sarah Mander, Tyndall Centre for Climate Change Research, University of Manchester
Dr Maria Sharmina, Tyndall Centre for Climate Change Research, University of Manchester

For the past decade, the typical UK community energy project has delivered decentralised and democratically owned, renewable power generation. These have typically relied on state revenue payments schemes (e.g. Feed-in Tariff) to be financially viable. By stabilising revenues and de-risking projects, they’ve not only provided an income stream but also helped communities secure finance to cover capital costs.

However, since the Conservative majority government formed in 2015, community energy has faced a series of disruptive policy changes. The discontinuation of revenue payments, an effective ban on onshore wind and the removal of social investment tax breaks), have created turmoil. Alongside the continued scarcity of capital grants, these policy changes have meant that community energy finance has simultaneously become more important and harder to secure.

This paper draws together a national survey, expert interviews and four community energy case studies. It finds that some communities have responded to these policy shocks by implementing novel, service-based business models in an attempt to capture new revenue streams that replace these lost earnings. Even so, critical barriers to community energy finance persist for all types of business model including the: 1) poor connectedness of the UK’s community energy finance supply chain; 2) poor community access to land and buildings; 3) limited time, skills and experience within communities; 4) limited opportunities to partner with local stakeholders; 5) poor access to wider energy markets; and 6) logic of institutional investors that prioritises scale and financial profit.

Policy action is therefore needed to address these barriers and to unleash new finance into the community energy sector. This paper presents eleven policy recommendations to achieve this aim, including but not limited to: 1) the provision of low-cost state community energy finance and a joined up finance chain; 2) grants and community benefit payments that support business model experimentation, especially in deprived areas; 3) minimum net-zero and just transition investment standards; 4) enforced partnerships with local authorities and NDPBs; 5) swift and affordable community access to under-utilised public land; and 6) a UK-wide community energy strategy and stand-alone delivery body.